It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in Enghouse Systems Limited (TSE:ENGH).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Enghouse Systems
The Executive Chairman & CEO, Stephen Sadler, made the biggest insider sale in the last 12 months. That single transaction was for CA$2.1m worth of shares at a price of CA$41.14 each. So what is clear is that an insider saw fit to sell at around the current price of CA$39.01. While we don't usually like to see insider selling, it's more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn't a major concern, though it's hardly a good sign.
Over the last year, we note insiders sold 262k shares worth CA$9.9m. Enghouse Systems insiders didn't buy any shares over the last year. The chart below shows insider transactions (by individuals) over the last year. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
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Insider Ownership of Enghouse Systems
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Enghouse Systems insiders own about CA$412m worth of shares (which is 19% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
So What Does This Data Suggest About Enghouse Systems Insiders?
The fact that there have been no Enghouse Systems insider transactions recently certainly doesn't bother us. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Enghouse Systems insider transactions don't fill us with confidence. Therefore, you should should definitely take a look at this FREE report showing analyst forecasts for Enghouse Systems.
Of course Enghouse Systems may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.